HDFC Bank gets RBI nod to hike group stake in 3 banks

MUMBAI: HDFC Bank has informed the stock exchanges that it has received approval from RBI for its group entities to hike investments in Kotak Mahindra Bank, AU Small Finance Bank, and Capital Small Finance Bank up to 9.5% of their share capital.

RBI, through letters dated Jan 3, granted approval to HDFC Bank, as the promoter and sponsor of its group entities, including HDFC Mutual Fund, HDFC Life Insurance, HDFC ERGO General Insurance, and HDFC Pension Fund Management, among others.

HDFC Bank clarified that while it does not intend to invest in these banks directly, the "aggregate holding" of its group entities is likely to exceed the prescribed 5% limit. This prompted the bank to apply to RBI on Sep 20, 2024, to approve increasing the investment limits. The investments, the bank said, are part of the regular course of business for its group entities.

HDFC Mutual Fund, with assets under management (AUM) of Rs 7.7 lakh crore, and HDFC Life Insurance, managing close to Rs 3 lakh crore, have significant investment portfolios. HDFC Bank holds the largest investment book within the group, primarily comprising government bonds, with its non-SLR book amounting to Rs 1.7 lakh crore. HDFC Pension Fund recently crossed Rs 1 lakh crore in AUM.

Investors in banks must seek prior approval from RBI before increasing their stake beyond 5% threshold, unlike in other listed companies where disclosures are triggered after crossing specific thresholds. SEBI regulations mandate investors acquiring over 5% of a company’s shares or voting rights to disclose their holdings within two working days. Further disclosures are required if the stake increases or decreases by 2% or more.

The approval, valid until Jan 2, 2026, is subject to certain conditions. HDFC Bank must ensure that the "aggregate holding" of its group entities in these banks does not exceed 9.5% of their paid-up share capital or voting rights at any time. "Aggregate holding" includes shareholding by the bank, entities under the same management or control, and holdings by mutual funds, trustees, and promoter group entities, as defined by RBI’s 2023 guidelines on banking share acquisitions.
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